The main reason for which people avail of personal loans is to finance an expense of a personal nature, such as a medical emergency or a marriage. In order to get approval for a personal loan, an applicant has to meet certain eligibility criteria and submit specific documents that inform lenders about an applicant’s ability to make repayments on the loan. One of the criteria, of key importance, is an applicant’s credit score or CIBIL score.
What is the Eligibility Criteria for a Personal Loan?
A personal loan is an unsecured loan without collateral. However, if you want to apply for a personal loan, you must fulfil certain eligibility criteria ensuring lenders of your ability to make repayments in a timely fashion. Personal loan eligibility criteria is listed below:
- Age – You have to be 21 years of age or more.
- Income – You must be earning an income of at least Rs. 15,000 per month.
- Citizenship – You must be a citizen of India.
- Work Experience – An applicant must have work experience of 2 to 3 years.
- Credit/CIBIL Score – You must have a credit score or a CIBIL score of above 600.
What is a CIBIL Score?
From all of the eligibility criteria you know about, the CIBIL score/credit score is one of the most important. This is a numerical value that gives lenders (banks and NBFCs) a summary of your credit profile and financial history. It indicates your ability (or inability) to make personal loan repayments. A CIBIL score falls in the range of 300-900 and the higher your score is, the better your chances of getting loan approval are.
What Influences the CIBIL Score?
You may be wondering if you meet personal loan eligibility criteria with a low CIBIL score. It is possible to get approval for a personal loan with a low CIBIL score, but you may face more restrictions on the loan than if you had a high score. For instance, the loan amount you desire may not be approved, compelling you to settle for a lower loan amount. Furthermore, lenders may charge you high rates of interest on the loan if you portray a low CIBIL score. If you know what influences your credit score, you can try to maintain it so it remains on the higher side. The factors that determine your CIBIL score value are the following:
- Outstanding Debt – If you have any outstanding balances on loans or credit card payments, you should settle these before you take a loan as these can make your credit score go down.
- Income – You should have a steady source of income, and this shows your viability to meet expenses and creditworthiness.
- Avoid Taking Multiple Loans – If you have taken multiple loans and have other loans to repay, or have applied to several lenders for loans, this reflects badly on your financial health. It portrays an image of desperation to lenders.
Finally Be Ready to Take a Loan
You can take a personal loan anytime, but you must be prepared with appropriate eligibility criteria, and this includes a high CIBIL score. A high CIBIL score informs lenders of your financial health, indicating that you can repay loans.